18 January 2010
Dear Prinku (as you look in the picture),
The terms asked by you is used in banking.
Fund based limits means funds are involved of the banker who sanctions such limits. For example; cash credit limits.
In non-fund based limits, funds of banker are not involved. The bankers take guarantee only when there is a default in the commitment by the borrower. Examples are Letter of Credit and Deferred Payment Guarantee.
In non-fund based limits; banker is a mediator only between two unknown parties.
CAclubindia
